5 Oz. Feature: Breaking down ProElite’s current situation

I’ve made a lot of phone calls and have done a lot of reading and can report with confidence that ProElite and EliteXC and are not on the verge of collapse as some have speculated. EliteXC canceled the Sept. 20 show for various reasons. First, it was behind the eight-ball when it came to finalizing a card and getting it approved with officials at SHOWTIME. The card also lacked a marquee main event needed to sell enough tickets to make a 18,000-plus seat arena look full and make the show profitable.

Another reason why ProElite canceled the show is to focus more on its Oct. 4 show on CBS. As of today, the card for that show has not been completely finalized. That task becomes a lot easier with all the displaced fighters from the Sept. 20 show now available. While I do not know this to be the case, it would not surprise me if there was another one-hour pre-show on SHOWTIME prior to the CBS telecast at 9 p.m. ET.

The first SHOWTIME pre-show prior to a CBS telecast on July 26 did not draw an impressive rating, but it may be a tough sell to put a 140 lbs. clash between Wilson Reis and Bao Quach as well as have a second female fight featuring Cris Cyborg on the network show. The Oct. 10 ShoXC event could be a possible landing spot for both those fights. It will be interesting to see what happens with Paul Daley. Daley’s erratic behavior have turned some people off but he remains an exciting fighter with star potential. Putting him on CBS would be a great way to expose him to a large audience.

The cancellation of Cage Rage’s “Contenders” event is being sold as a way for the UK-based promotion to focus on its bigger November event. The reality is that cost cutting is taking place. The promotion is down to three full-time employees and they are now renting out smaller venues. You don’t cancel an event days out before it is supposed to take place because you want to focus more on a future event. When an event is canceled that close out, it’s done because the promoters anticipate taking a loss and they cancel it to cut those losses.

The huge jump in the value of the stock on Friday is not something that is clear to me. I’m an investor in stocks but hardly an expert. The way it was explained to me is that people are reading too much into the new price and that it really isn’t that big of a deal. The same applies to the company’s decision to file for an extension in regard to reporting their second quarter results. Many micro-cap stocks are repeatedly requesting extensions because they lack the staff resources needed to do full financial reporting while still trying to run a viable business.

As a micro-cap company that is not attached to a major exchange and isn’t carried by major firms because it’s a pink sheet, there isn’t a lot of volume trading going on. According to the financial information that is out there, a single investor recently bought 5,300 shares and that is what pushed the stock up. And unlike a major stock, a micro-cap’s asking price often has little to do with its true market value. Just because someone bought the stock at $8 a share doesn’t mean they will be able to sell it for anywhere near that much. If you try to sell stock in General Electric, you’ll have no problem unloading it because it’s a high volume stock. There are always people looking to buy stock in GE. The same cannot be said for such a small company such as ProElite. ProElite stock often goes weeks without a trade. The next time it’s sold it probably will be for a lot less than $8 a share and when it does sell, that will likely be the new price.

The one thing I do not understand is why someone would pay $8 per share. If the stock price is at $8 a share, it means someone sold it at that price. And if it was sold at that price, someone had to buy it at that price. I’m not sure how someone could unload 5,300 shares of stock at $8/share when it had been trading at $2.50/share. Even if they were contractually locked in to buy at $8 a share, why would you strike at that price considering it’s trading so low? Since it was only one investor, maybe they got some bad advice? Or maybe they were being generous and trying to get someone some money? Or, maybe someone decided to spend $40,000-plus dollars to try and take away some of the negative attention for the Sept. 20 cancellation? Again, I’m no stock expert so I could be way off the mark here. The important thing to know here is that the company is not on the verge of being bought by the UFC, CBS, or anyone else.

Also, some have speculated that the stock jumped because of a possible merger with Affliction. Well, a merger with Affliction is out of the question for now. On paper, a merger makes sense. Affliction would get access to EliteXC’s major distribution platforms and EliteXC would get to feature Affliction’s high-priced talent on its platforms. But from a pure business standpoint, a merger makes no sense. It remains to be seen if Affliction can afford to pay its talent for what they are contracted to be paid. If EliteXC wasn’t able to go out and sign guys like Andrei Arlovski, Josh Barnett, and Fedor Emelianenko in the first place, how could they afford to take on their six-figure guarantees now? Neither company is in a position to take on the other company’s problems. But for the sake of ensuring that there’s a viable competitor in existence to rival the UFC, they may need to find ways to work together and support one another.

So for now, EliteXC is not in danger of suddenly going out of business. According to their SEC filings, it appears they have enough capital on hand to get them through the year. Will they be able to go out and land major free agents such as Tito Ortiz? Most certainly not. Can they afford Frank Shamrock’s six-figure guarantee and book him for a show? I have my doubts. No matter how you want to spin it, the promotion is underfunded, as it came well short of its goals for executing a raise. The $3 million it did raise several months ago is believed to be nothing more than a loan from corporate partner SHOWTIME. The fact that the company was not able to attract new major outside investors following the strong numbers that its May 31 show did on CBS is a major cause for concern.

But the changes and cuts we’re seeing made are being done to help insure that the cash to get them through the end of the year is there. In addition to the management changes involving the resignations of Gary Shaw and Doug DeLuca, I’ve heard that other staff cuts were made. I can’t get confirmation as to who was let go at EliteXC but MMA Hawaii is reporting that Patrick Freitas, a matchmaker and marketing guy at ICON Sport, who was a vital part of the company’s success, recently resigned. It is surprising because Freitas was often an active voice in the Underground forum and quite often came to ProElite’s defense and sounded very positive about the company’s long-term prospects.

One thing to take note is that even though Shaw and DeLuca have taken on reduced roles, they are still being paid the same. The Wrestling Observer even reported that DeLuca received a bonus upon his resignation. Why would such moves take place? This is pure conjecture on my part, but if someone has a guaranteed contract then a company can only take their salary off the books if they have just cause to fire them. If ProElite wanted to get some new leadership in place with a different vision for the company’s long-term growth then they just couldn’t cut the contracts of Shaw and DeLuca without winding up in court.

If the company can’t reduce its costs by cutting back on upper management then they will have to find other ways. Not going through with shows such as the Sept. 20 event that they may started to believe would be a money-loser is one way. Investing less money in smaller shows such as Cage Rage and ICON Sport that offer EliteXC little exposure is another way. If you look at the August ICON show, it featured Phil Baroni and then Quach vs. Mark Oshiro. Baroni doesn’t fight cheap and while a match between Quach and Oshiro isn’t going to break a show’s budget, it’s a pretty good fight that easily could have headlined a ShoXC event and been presented to more potential viewers. It was essentially a title eliminator fight that hardcore fans would have cared about but had no way of watching.

One idea for ProElite to consider until it improves its financial position is to stop promoting mid-level EliteXC shows such as at the one that had been planned for Sept. 20 and instead just focus on doing ShoXC events and major CBS shows. ShoXC events appear to be money makers. Most promoters I have spoken to indicate that most casinos pay an event fee for promotions to bring a boxing or mixed martial arts event to their casino. In this situation, a promotion doesn’t have to worry too much about ticket sales, marketing the event, or rental costs for a venue. The fighter budget for a ShoXC event is also much less than what a show such as the Sept. 20 event would have cost, plus, there is no rental fee. Renting out a 18,000-plus seat arena for a night is not cheap.

If EliteXC cut back from mid-level shows for the time being, they would then have the depth to bring more star power to the ShoXC events. Proposed fights for Sept. 20 such as Daley vs. Lyman Good and Reis vs. Quach for the vacant EliteXC 140 lbs. title would fit in well for planned ShoXC events on Sept. 26 and Oct. 10.

In order to make it into next year, ProElite must secure financing. In order to continue to operate like a major national promotion, it needs to secure lots of it. I’m not sure it’s going to be able to do that. For one, the economy sucks right now. This is a terrible time for startups and young companies to have to go out and try and secure investors. Second, investors aren’t as bullish about MMA as they once were. If an MMA company makes a pitch and presents a PPM to a prospective investor, that investor is going to do its due-diligence. And when the investor does his or her research, they are going to see that the IFL, WFA, BodogFIGHT, and several other promotions faded into oblivion. The reports of low ratings and poor attendance for the July 26 show didn’t exactly do much for investor confidence either.

Some are speculating that it will be CBS who rides in and saves the day. That was my prediction at one point. However, CBS isn’t going to make a play for the company anytime soon. I know that some network executives at CBS were pleased with the quality of the July 26 show but I don’t think many people can be happy with the ratings even in light of the fact that expectations were tempered. The reality is that the masses want to see recognizable names fight each other. You could put on the greatest card in the world that has hardcore fans foaming at the mouth but it’s not going to draw a strong rating if the starpower is lacking.

As much as I love it when corporate executives pay attention to blogs, perhaps CBS paid too much attention to them? The July 26 show was programmed in large part in response to what was written by members of the hardcore MMA community. Is that the right way to go? It was television pioneer Roon Arledge who once said in regard to “Monday Night Football,” “F— the fan, they’ll watch anyway. Let’s go after the casual viewer.”

Arledge was a man ahead of his time. If MNF was a pure football show, it wouldn’t have lasted more than a season. But because they jazzed it up, it changed the way people watched the sport. “Saturday Night Fights II” was a much tighter production than “Saturday Night Fights I” but SNF II looked more like a SHOWTIME event while SNF I was a new way to present how the sport was viewed and it hooked the casual television viewer that was channel surfing.

If you watch NBC’s prime-time coverage of the Olympics, you’re not watching a pure sports event. They are doing a lot of story-telling and selling a lot of human-interest drama. Such an approach angers pure sports fans to no end, but without the casual viewer, NBC would be better off running new episodes of “Deal or No Deal” as opposed to spending billions on the summer games every four years.

When you look at what CBS has done with MMA after its first two shows, I think they need to find a happy medium going forward. The production for the 5/31 show was a little overboard. But perhaps the production for the 7/26 show was a little too stripped down? You need something for everyone, which is the direction EliteXC when in for its “Street Certified” show this past February, a show that I consider to be the company’s most successful to date.

If you are looking at things from a business perspective, one thing that the company cannot afford to do on Oct. 4 is a match involving Slice and Brett Rogers. Rogers would be a heavy favorite in that fight and could possibly finish Slice early. Slice has the better technique when it comes to the standup, but Rogers will have a serious advantage when it comes to power. Slice’s fighting weight is 235 lbs. while Rogers cuts to make 265 lbs. and apparently has weighed at much as 280 lbs. on the day of his fights. Slice could be giving up as much as 45 lbs. if the two meet. So what you have is a lighter heavyweight fighter going against a super heavyweight. If this was Olympic-style boxing, Slice’s footwork and head movement would allow him to out-point Rogers. But Rogers has massive hands and if he touches Slice’s chin, he’s going to be dazed.

When Slice fought former heavyweight boxing champion Ray Mercer in an MMA-rules exhibition match in 2007, Slice’s camp decided for him to play it safe and take Mercer off his feet and not to stand with him for a prolonged period of time. The strategy worked like a charm but Mercer was in his mid-40s and abandoned any attempt to learn ground fighting after a couple of classes at Ricardo Almeida’s. Rogers is not a master of ground fighting but reports on him is that he’s a good natural wrestler. I would think a man that big and strong would be rather difficult to take of his feet. What I’m getting at here is that Plan B isn’t an option for Slice. He’s going to have to stand and slug it out and the odds are against him. He might want to fight Rogers, but he’s not ready.

EliteXC has not built many stars and Kimbo is one of their few exceptions. If he loses to Rogers in his hometown, that will kill him completely as a draw. The promotion needs more drawing cards, not less, which is likely why the promotion is holding off on promoting a match between Gina Carano and Cyborg. Coming off Slice’s disappointing performance vs. James Thompson during the 5/31 show, EliteXC needs to build him up again and give him more time to develop. Hardcore fans will bitch and moan that he’s not fighting top competition, but after three pro fights, should he be fighting top competition? Many will point to Brock Lesnar as a guy going out there early in his career and taking on top guys but Lesnar is an aberration. Slice is not Lesnar. But how many fighters are?

The company needs to choose wisely when finalizing Slice’s next opponent. For the life of me, I can’t figure out why they wouldn’t do Ken Shamrock vs. Slice. The promotion is believed to have soured on Shamrock following his upset loss to now-retired Robert “Buzz” Berry during a Cage Rage event earlier this year, but how many people saw that fight? And did Thompson not lose to Rogers in February yet he was brought back to headline vs. Slice? I don’t see anyone complaining about the ratings for Slice vs. Thompson.

EliteXC needs to bring back the casual viewer for the Oct. 4 show and the Shamrock name could help in that regard. Plus, the loss to Berry could be viewed as a positive in some ways. The average casual fan will be oblivious to the loss and a promotion that is looking to cut costs could use it against Shamrock when trying to negotiate a guarantee for a fight with Slice.

Those speculating that CBS is about to buy EliteXC need to realize that it is not going to invest heavily into ProElite coming off the numbers from the 7/26 show. Being a network television executive is a high-pressure job that doesn’t usually offer a lot of job security. A network television company buying a mixed martial arts promotion has never been done before. If executives push CBS to buy ProElite and the bottom falls out, chances are they’ll not only be looking for a new job, but they could be looking for a new career as they could be branded as untouchable in the television industry. It’s too high risk for CBS to buy the company out now and whether they’ll be interested in doing so in the future will have a lot to do with how Oct. 4 goes. If the ratings aren’t strong, why would the network buy programming that it may end up canceling or not renewing in the future?

EliteXC has to make sure the ratings are good for Oct. 4. They need to use the same formula they used for “Street Certified” to make things work. Slice vs. someone like Shamrock and Carano vs. Kelly Kobald-Gavin will be a good hook for the casual fans. When filling out the final two matches on the show, they should keep the hardcore fans in mind. Sure, they’ll bitch about Kimbo but if you give them Jake Shields, Eddie Alvarez (who is not expected to be on the show as he takes time off to get married… but man, they really need him), Quach, Reis, etc. that will get them talking enough for them to tune in. They also need to do a better job building up the K.J. Noons to Nick Diaz feud. Trying to pretend the melee that happened on June 14 never took place is a bad idea. EliteXC is handed a gift and it wants to take it back for a refund?

We already know the Oct. 4 show will have a stronger lineup from a marquee name standpoint than 7/26 but will it be enough? May 31 got a great number because all of the planets were aligned perfectly. There wasn’t much competition for the 18-34 demographic and they had months to promote the show to a targeted demographic during events such as the NCAA tournament. But you know the UFC will counter-program the Oct. 4 show again and EliteXC could be going up against both college football and the Major League Baseball playoffs that night. Also, how much promotional resources can CBS devote to “Saturday Night Fights” in August and September when it has to promote its new fall lineup?

There’s also the curiosity element to factor in. A lot of people tuned in on May 31 just to see what all the buzz about MMA was and exactly who this Kimbo Slice guy was. A lot of new fans were created while a lot of people will never tune in again. The first telecast of mixed martial arts in prime-time network television history was a big marketing hook that can never be used again.

If the Oct. 4 show does not hit it out of the park in all facets then CBS will not be the corporate savior some expect them to be. And without their support, I do not see how ProElite can survive. If EliteXC folds, I don’t think that will be good for fighters or the fans (competition brings the best out of everyone) but this is how I see things breaking down. If something doesn’t change and change soon, we could be living in a UFC-only world by next summer. Having four major national promotions compete for the same nut might not be the best thing for the growth of the sport. However, I am not sure having one major national promotion is good for the sport either.

Great post Sam, I’ve never taken the time to think about Elite XC in such detail. I hope that they can survive, they have some real stars on their hands, they’re definitely going to have to go all in for the CBS card

I think they may be smart to put a title fight or two on this show also. Dave Herman comes to mind as a formidable opponent for Antonio Silva, as well you could have Diaz vs. Noons 2, I definitely agree that the time is now for this one

If they’re to do an hour on Showtime beforehand they could even add a LHW Title fight with Rafael Feijao, a #1 contender’s fight between Rua and Villasenor, and throw Paul Daley in there with someone like John Alessio. That would be a huge night of fights for Elite

LBL, it was spell checked. If it’s riddled with spelling errors, then you need to point them out. As far as grammar, this is a blog, not the New York Times. Would you care to comment on the merits of the post or do you have nothing to add? It’s real easy to get on a blog and try and show someone up and say “It’s riddled with errors” and then not point any out.

EliteXC needs to really market certain fighters more. They can’t rely so much on slice and carano. Atleast Gina has proved herself… Slice is still in that awkward phase between street fighter and legitimized mixed martial artist. They really need to marker Shilds, Diaz, Noons, and a few others a hell of a lot more. If they begin marketing more fighters, they won’t have a problem finding headliners or an audience.

Mike, Shields, Diaz, and Noons are great fighters. The question I have that has yet to be answered is whether Shields, Diaz, Noons, and Robbie Lawler have the star aura needed to break through as big-time draws. I’ll pay to watch them any day of the week, but can the casual fan be turned on to them? People can say what they want about Carano and Kimbo, but they possess an “it” quality that few fighters in the sport have.

Sam, quick observation, does any of this remind you of the old AFL-NFL war in the 50’s and 60’s and ever the USFL in the early 80’s? I know each promotion has a handful of stars, but no one’s roster comes close to rivaling the UFC. Part of me is telling me there just isn’t enough solid talent around to keep 2-3 promotions afloat successfully and that in the end the UFC will be the major leagues and anyone else will turn into a feeder system. Just curious about your thoughts on that.

SHILL! Please…there is nothing new here…just speculation…saying you are canceling a card to focus more on your next one is a lame and easy answer…maybe they should have planned ahead better before announcing all these cards…

Also agree that they should do Ken Shamrock vs. Kimbo as the main event on Oct. 4th. Honestly, Shamrock still carries a lot of pull in the eyes of the casual fan. Look at what he and Tito did on SpikeTV. The Proelite execs need to make this match. Sure hardcores will complain about Ken being washed up, but who cares?

I definitely agree with you on Eddie Alvarez. I absolutely love watching him fight. I know he wants to finish what he started in DREAM, but ProElite really needs to get him in front of the camera here in the US, and build him up to face the Noons/Diaz winner for the title sometime next year. He’s a superstar waiting to happen.

One more thing – I was going over Proelite’s last published financial report and I am amazed at how much they spend (waste) in exec salaries. People say that buying companies like KOTC or CAGE RAGE undid them. Not really. What they paid for those is a drop in the bucket compared to what they paid execs in 2007 (over $13 million, nearly 1/2 of their debt). I guess someone got fat during this period.

Hey Sam, this is a downright fantastic article, with the appropriate amount of factual data and well thought speculation. Appreciate it and your honesty. That said, as much as I agree with you, it really bums me out to see that basically the sport needs to be dilluted to keep the organization afloat. I recognize the reality of it from a business standpoint, but as an MMA fan first, it makes my stomach turn and heart sink to read the cry that we need Slice versus Shamrock, or Carano vs another overmatched opponent. The need may be there to keep the promotion going, but at what point do we realize that it is more spectacle than sport on the airwaves? We could debate whether the neccesity is there for the growth of MMA on the whole, but I question what that growth will lead to if these are the matches we push to make it happen.

With Champion fully in charge now, I’m not surprised by the cancellations. He said that ProElite had sometimes lacked focus and I think THAT many shows would have spread even the UFC a little thin. ProElite have to focus on the big shows for CBS, now more than ever.

I think the real problem with ProElite is that they need to build some of their existing stars (or possibly pony up the $$$ for an existing name) and stop banking everything on Kimbo and Carano.

I know this might tickle a few ass hairs but….the industry should maybe take some cues from the old pro wrestling model. Basically Vince McMahon Sr. was going around buying up a lot of small promotions and creating the WWWF/WWF/WWE. A bunch of other promoters decided they needed to stand up to this guy so they formed the National Wrestling Alliance/NWA. This was an alliance of promoters that shared their talent among all of the promotions. You are seeing this in a limited way now with MMA. Nick Diaz has fought for Dream and EliteXC. Barnett has fought for Sengoku and Affliction. What they should do is organize. Maybe under the WAMMA banner. You have ProElite and Affliction with top tier talent. Then they should ally with as many small promotions as they can. Things like PFC, Adrenaline, etc. Then you have one or two big names that “pad” the cards for the smaller guys. This creates a lot of interest at the local level. So you might have Kimbo do a one off show with PFC, or Frank Shamrock on an Adrenaline card. This is great for fighters that are a past their prime such as Ken Shamrock or even Tank Abbott. Guys who are maybe not a big draw on the national scene, but can do wonders for a local show. Plus you have the occasional dark horse guy that can come up from the small ranks. They should even be open to rare showings by the champions. Bring Fedor in to a 5,000 seat venue. Not only will the place be packed it would be an absolute madhouse. Something like this is the only way I see any of the other promotions surviving. They need to unite under one national banner to go up against the UFC.

wow Sam, great article. Maybe some of the layoffs with their upper management at ProElite was to make room for you up there:) I think you are spot on with how the October show should be approached, and how the company should look going forward. It is just funny that the blog is a major MMA website where the target audience here is not what ProElite needs.

I don’t think their model will promote MMA per se, but it is certainly more viable for them to have a running company than concern themselves with the integrity of MMA. the potential is there for them long-term with their devlopment of younger guys, and they should try and focus on some specific areas (e.g. Dana talks about the hispanic audience with getting Roger Huerta out there, but EliteXC could try this to a small degree as well).

A lot of people say that MMA needs competition but competition just for competition’s sake isn’t necessarily a good thing, it has to be a successful company with a good product. EliteXC has had some decent shows but they have also made some real bone headed mistakes and they are absolutely hemorrhaging money. That kind of “competition” isn’t really helping the sport it is just scaring away future investors.

Could we please keep WAMMA out till they actually do something for the sport other than position themselves to make money off other people’s work.

They claim they are going to do all these things for the sport other than having title belts and they have done none of it. They have only showed to me so far they are interested in making money off their belts that have zero credibility.

Sorry about that.

On to the topic at hand. Very good article Sam. But the one reader/commenter mentioned reading their financial reports and determining they paid their executives what would equal to half their debt. Why didn’t you include that information in your article? It mentions you can’t fire them without just cause but isn’t just cause losing millions of dollars? If half their debt is salary then cutting that salary is fixing half the problem in my eyes. Why can’t that be done or is that accurate?

Matt, I didn’t mention it because when I read their reports, I didn’t see that half their losses are due to executive salaries. PE has lost over $30 million. I don’t believe $15 million was spent on executive salary alone. That doesn’t add up.

Also, I guess you aren’t familiar with the term “just cause.” Making too much money does not constitute “just cause” if you have a guaranteed contract.

Hey Jackyl
The idea to merger affliction and pro elite was addressed and dismissed as pro elite and others cannot fulfill contract obligations that affliction has made. If there were no big contracts then hell yeeah!

Matt, it depends on how the company lost the money. If the losses were due to nefarious acts, that is “just cause.” If the losses were from gross neglect, i.e. an employee is moonlighting for another business entity he didn’t disclose when he joined the company, that’s “just cause.” Whether you agree with it or not, bad judgment does not legally fall under the category of “just cause” if you have a guaranteed contract.

“Cause if losing a company millions of dollars isn’t “just cause” then we have a huge problem in the corporate world.”

This has been going on for years. Why do you think the term “golden parachute” exists? ProElite is hardly unique in this regard.

While competition is good for the long-term growth of the sport, they need healthy competition. While all of these new promotions are driving up salaries and helping fighters get paid, what is the point if the company is out of business in a year. The headliners in the UFC are making millions of dollars after PPV bonuses, and even the card fillers are making 50k plus in endorsements per fight. Nowhere else is there more than 2 or 3 fighters on a card making that kind of money except for affliction which also appears to be hemorraging money.

Now what exactly is “General and administrative expenses”? It surely isn’t fighter salaries as that is covered under “Live Events” under “Cost of Revenue” (a total of $9,581,296 for 2007). So what the hell did Proelite spend that $13 million on in 2007?

William, but he said upper management salaries. There’s a difference between internal salaries and upper management salaries. At one point ProElite had over 80 employees. Those people need to get paid too.

Great article. I kind of disagree on the hardcore/mainstream point…it was the lack of stars, not the lack of dancers and nonsense that brought this show down. They didn’t use Kimbo and Gina because they couldn’t, not because hardcores didn’t want them. Really it is CBS’s fault for idiotically demanding a second show when there was no star power to carry it.

I have concerns about the next show. It will go up against serious competition in the form of the sports you mentioned, which will hurt the demo they need. The UFC will also put on a PPV replay against it, probably UFC 86 to try to get Jackson/Griffin on at the same time as Kimbo. Do we even know what kind of bonuses Kimbo has written into his contract besides his salary? I have a feeling he has a pretty big contract, can they even afford it now?

I’m not sure about bonuses. The salary figures for May were not made available by the New Jersey Athletic Control Board. According to the figures for February, Kimbo was paid a $125,000 guarantee and then a $50,00 win bonus for a total of $175,000. That is relatively inexpensive for a headliner. I’m not sure if he has an escalator clause in his contract though. Regardless, I’m confident ProElite has the money to pay him. They are underfunded and burning through cash, but they aren’t broke… yet.

General and administrative expenses are pretty much all the other expenses besides the other ones mentioned, it’s not just executive salaries. It cost money just to run a business the size of ProElite day to day (something that seems to escape a lot of people’s attention). Yea they might be paying executives too much but there is a heck of a lot more to general expenses than that.

It’s hard to believe that Kimbo signed an extension at such a low level of salary. I have a feeling he gets portion of gate, merch, and possibly a large downside guarantee in addition to that money. If that’s really all he is getting his management screwed him. A lot of star fighters have high downsides in addition to their disclosed amount. Mirko Cro Cop for instance in the UFC only had a disclosed salary of 350,000, but he made significantly more per fight with contractual guarantees.

The point with being able to pay guys is, if they only focus on 3-5 events per year, they cannot keep their guys busy enough to have them as exclusive fighters for their promotion.

Mike, it’s really hard for a fighter to demand a high guarantee if the UFC is not a viable option for them. Right now, it’s not. If Dana White had dropped hints that he would be interested in Kimbo in the UFC, that could be used in negotiations to drive up the asking price. But since he has almost done nothing but rip into him, he’s not left with a lot of options.

People wonder why Antonio Silva got $200,000 in July and it’s because he re-signed right after Joe Silva was very complementary towards him while speaking at a UFC Fight Club Q&A.

With the UFC identified as a viable alternative for Silva, EliteXC was left with the choice of paying him extra to re-sign with the company or risk losing him to the UFC and appear as nothing more than a feeder league to the UFC.

There are many who perceive EliteXC to be an inferior brand to the UFC, but it’s hard to call them a feeder league if they’ve retained all of their top fighters.

If Slice doesn’t take what EliteXC offers him, what other company can he look to to help drive his asking price up?

I wonder if part of the General and administrative expenses was the money paid for the acquisitions of Cage Rage, Icon Sports and KOTC and their investment into SpiritMC? I’d be willing to bet that the $464,870 paid Gumbiner Savett, Inc. for accounting and audit services is part of that too.

The salaries for Doug DeLuca, Kelly Perdew and Gary Shaw for 2007 are listed on the sec link posted above. There is no need to speculate about that it’s in the report too.

Regarding CBS buying Elite: The deal CBS to continue to purchase shares of Elite with each show and with each year they bring them back.

Will CBS own a majority any time soon? No, but they would continue to gain more power the longer that Elite is on CBS.

Elite is not going out of business, anyone that thought they were does not understand the business side of MMA.

But there certainly is reason to be skeptical about Elite’s future. They have yet to run a profitable show and still have not created any bonifide stars. The idea was the Kimbo would draw folks and once they would see guys like Lawler. At that point, Lawler would become a star.

That did not happen, despite two very exciting matches on national tv.

Elite will continue forward, but it is going to require more money from CBS.

I mentioned this in a post on the previous story, but I think Elite has at least two more CBS shows. If they have not developed a solid base and do not deliver solid ratings, they are likely in big trouble.

Personally, I would be curious to know how much CBS had to do with the personel changes at Elite.

[…] is just putting on blind folds and throwing darts at ideas to keep things going. Sam Caplan at Five Ounces of Pain dives into the details: So for now, EliteXC is not in danger of suddenly going out of business. […]

[…] Apparently EXC is such a small stock its asking price has little to do with its actual value. 5 Oz. Feature: Breaking down ProElite’s current situation :Five Ounces of Pain __________________ As elusive as Robert Denby. Cheese frog. […]

I wasn’t suggesting a merger. I’m suggesting the smaller promotions form an alliance of some kind where they at least cooperate. Example: An Affliction fighter fights on a ProElite card. As part of the Alliance Affliction may pay some or all of their fighter’s salary. ProElite can retain the primary branding but the fight with the Affliction fighter could be labeled a special attraction with co branding or heavy promotion for the next Affliction show. My point is essentially these other promotions can’t survive with the talent pool spread so thin. Affliction has some great fighters but they still need to build mid tier depth. All of the mid tier guys are sucked up by these other folks. Now you have the AFL trying to do a PPV. That is going to tank. Their only chance is cooperation.

These promotions need to get their act together before the Ufc gets on regular network tv. Otherwise it will be lights out. If that happens Zuffa has the Wec as a talent supplier to the ranks of the Ufc. They have the ability to make it work and be consistent in matchup making. That would be every other promotion worse nightmare.

Sam, I have a thought on the sale and price-boost for PE shares. You say that “one thing I do not understand is why someone would pay $8 per share.” That is confusing, but…

There might be a couple of reasons for such a dramatically higher price someone would be willing to pay for a low-volume, minimal-action, micro-cap stock. Usually it has more to do with internal deals than it does just some random public investor who decides they want a piece of the company.

I obviously can’t say for sure, but if the asking price was $2.50, and someone decides to pay $8, unless that new investor is insane, it is probably due to some other agreement made for reasons totally outside of the stock sale. The first reason might be a current large investor wanting to up the capital resources of the company without dealing with the tax issues creating by simply transferring or loaning that amount of money to the company from another corporation or a personal account. Say you have a large investor, like CBS perhaps, that wants to infuse money into PE. Instead of a transfer or loan, they simply agree to buy the stock at an inflated price, in effect, giving a temporary boost to the capital resources PE now has on hand because of the difference between the actual and the inflated prices.

The problem with this is, although I don’t know the trading volume of PE, the 5,300 shares doesn’t seem like it would be enough to infuse a substantial amount of capital, even if they were bought at over 300% the previous market price.

Another theory might be that this was arranged as part of a severance package to someone (likely an executive) that is cashing out their PE stock upon termination of their contract. The severance package/termination agreement might have included an agreement that the company, or the board, will buy back the stock interests of that particular executive at an inflated price, sort of like a severance bonus. With the way ProElite/EliteXC is canning executives, this is probably a likely scenario.

This is just speculation, but hopefully it adds minor insight into some possible scenarios for the stock price jump.

if the rogers/kimbo fight has potential to be anything other than a squash on kimbo’s part, and it sounds like it does- why not book that fight? you have a chance to either improve kimbo’s legacy, or build a new star in rogers and hype the inevitable revenge match if rogers does find a way to win?

i never understood their policy of feeding guys to kimbo, and if they keep doing it, they will shoot themselves in the foot by weakening his long term marketability.

As for “just cause,” I doubt that is the reason for keeping Shaw and DeLuca on salary. Most times, “just cause” employment is used for union labor or hourly employees. If I’m not mistaken, ProElite is incorporated in California, and run out of L.A. California is an “at-will” state, and has one of the strongest precedents for “at-will” employment law out there.

More likely, PE keeps these guys on payroll so that they could make the executive management transitions nice and quiet without too much public mudslinging. Also, you don’t get to be an executive at that level without being pretty friendly with the rest of the board, who are a group of people who would want a “golden parachute” themselves if they were in Shaw’s/DeLuca’s position of being let go. Shaw and DeLuca have also, no doubt, put a lot of their friends and trusted employees in important roles within EliteXC/ProElite, and the PE board would not want them to take these people with them and gut the company if they gave them the axe.

Also…

This has been on my mind for quite some time, but at the risk of sounding politically incorrect in the politics of MMA, I’m not sold on the drawing power of Gina Carano. EliteXC’s stars are always mentioned jointly, as in “Kimbo Slice and Gina Carano….” But I don’t think that is accurate. I think Kimbo Slice had a lot of YouTube hype, and a general interest in his image and story. The buzz around him brought a huge audience to the first CBS show, and Carano was merely peripheral to Kimbo. Whether Kimbo will maintain that buzz remains to be seen, but I am fairly certain that Carano does not have the drawing power that many believe. While it seems clichéd among MMA articles and blogs to say “Gina Carano and [her opponent] stole the show…,” I have never heard any casual buzz about Carano. Kimbo, on the other hand, was talked about around the office and the sports bars like few others.

While the comparisons aren’t exact, women’s boxing has never proven a draw. In this case, I have a hard time imagining Carano ever being able to headline a show. People may point to her being on “American Gladiators,” but if anything, she has drawn more MMA fans to watch that show, not the other way around. Even if you could make the best possible women’s MMA match, Gina Carano vs. Tara LaRosa, you still wouldn’t even generate as much interest as some of EliteXC’s lesser stars, like Diaz or Lawler. A Carano/LaRosa or a Carano/Cyborg match would barely sell a single ticket, or get a single advertiser more than would already be on board based on the real headlining fight on that card. Sure, she’s easy on the eyes, and Carano may be worth all the hype as a fighter, but the real myth is in her drawing power.

That leaves EliteXC with their one and only “star,” and his invincibility was seriously called into question on the May 31 show. Kimbo alone won’t save the company, and at this point, I’m not sure there is much that will.

[…] Related: We’d previously wondered what was up with Pro Elite’s recent strange behavior; though they’ve canceled two upcoming events, Sam Caplan at FiveOuncesofPain reports that the company is not on the verge of collapse. If you’re interested in Pro Elite’s current financial situation and how they might improve their condition in the future (and if you have some time to kill), we suggest you read Caplan’s full analysis here. […]

Here is what they spent to make that 3.6 million:
Live events: 2,865,002
PPV/TV licensing 17.425
Showtime/CBS 500,000

Non-cash amortization of prepaid distribution costs and expense for vesting warrants – Showtime, CBS (This includes the decrease in value of warrents issued to Showtime and CBS) 3,183,562
internet 34,237

Total cost of revenue: 6,683,697

So on the shows, they lost 2,997,046

Operating expenses were 15,694,761
They managed to cut back on the internet expesnses a bit, it ended up being 666,201 for the quarter.
Admin expenses were also down: 3,247,117 vs. 4.39 million in the same period last year.

However, they had 10.292 million in impairment charges. As I understand it, this is the declining value of assets. This is not nec talking about physical assets, but could mean Cage Rage or other brands they have purchased as well as the value of merchandising rights and whatnot…if you don’t completely understand that, don’t feel bad as I have only a mild grasp of it.

The overall loss for the quarter was 18,719,364.

Overall losses for the first half of 08: 24,390,236

One thing I found interesting was that while they got 900k from CBS/Showtime, it cost them 500k. So Adding CBS brought them only 400k. As I had pointed out at the time of the deal, the actual amount that CBS is paying is little.

Elite actually made more (1.2 million) in the first three months of the year just with Showtime.

As of the end of June, Elite had 3,460, 239 in cash. So Elite has about the same amount of cash right now as they did at the end of the first quarter (3.6 million at that time).

As has been said elsewhere, Elite is looking to secure more financing so they can continue.

Elite will be a leaner company from here on out, with fewer employees. This is not going to make things better all by itself, but will help.

The key for Elite will be using the next CBS show (or two) to build for PPV. It goes without saying that they need to deliver strong ratings for the next one or they will be in critical condition. A poor rating will make it hard to get advertisers to sign on board for a fourth show. Bad ratings and poor advertising revenue would cause CBS to dump them.